Critics Decry 'Destroy and Lend' Policy in Lebanon

by Emad Mekay

Lebanon is firmly en route to becoming the third
nation in the Middle East after Iraq and the Palestinian territories to experience
a devastating Washington-backed war and a massive influx of new illegitimate
debt to cover reconstruction expenses, anti-debt activists say.

A conference held Thursday in Stockholm for donors raised more than $940 million
in pledges of new money to reconstruct Lebanon after 33 days of Israeli bombing
of the country's infrastructure, bridges, roads, and factories.

More than 1,100 Lebanese people were killed in the conflict between Israel
and Hezbollah, a third of them children under 12. More than one million were
forced to leave their homes.

Initial official figures estimate the first phase of reconstruction at $2.5
billion. Damages include some 150 bridges and an oil spill that dumped 15,000
tons of oil into the sea and polluted 90 mi. of coastline.

According to the UN High Commissioner for Refugees, 60,000 housing units in
Lebanon were damaged or destroyed in the war, of which at least 15,000 were
completely destroyed while another 15,000 sustained major damage.

Since the Aug. 14 cease-fire, the United Nations says the return of hundreds
of thousands of people to their homes has been hampered by enormous quantities
of unexploded ordnance (UXO), especially the bomblets scattered by cluster bombs,
which will place a long-term drain on the government.

Prior to the conference, the Lebanese government said at least $540 million
were immediately needed to help the country with short-term recovery.

On Thursday, the International Monetary Fund (IMF) said the damages could reach
at least $3.5 billion for infrastructure alone.

"We have heard of preliminary estimates of $3.5 billion in infrastructure
damage, to which one needs to add the impact of the massive displacement of
the population, the exodus of many professionals, and possible private sector
bankruptcies," the IMF's representative at the Stockholm meetings said
in a statement.

At this rate, Beirut will most certainly continue to turn to international
lenders and donors for help with reconstruction for a long time. And this, debt
watchers say, will in turn plunge the country into greater debt.

World Bank figures show that Lebanon was already up to its neck in debt 
some $22.2 billion  even before the war. For a country of only 3.5 million
people, the smallest Arab nation, it is a colossal burden.

"What was already a difficult budgetary and debt situation has been made
much more precarious by the conflict. Government debt stood at 175 percent of
GDP [gross domestic product] at end-2005, one of the highest ratios in the world.
The conflict has made matters much worse," the IMF said.

The country's main creditors are Saudi Arabia and France. Both have pushed
for a neo-liberal set of policies in Beirut, which led to the privatization
of pubic assets and, critics say, the empowerment of local elites and foreign
companies at the expense of the middle classes and the poor.

The European-based Committee for the Abolition of Third World Debt (CADTM)
notes that in 2004, Lebanon paid out $4.4 billion to service its external debt
and warns that new borrowing will bring further pressure from rich nations and
international financial institutions like the IMF.

"This implies another increase in its debt and in new economic measures
of structural adjustment which accompany it," said Éric Toussaint
and Damien Millet of CADTM in a brief assessment of the country's new needs.

"Therefore, the Lebanese people are going to have to pay very dearly,
in the years to come, for consequences of this war inflicted by Israel in violation
of international treaties governing relations between states."

Just like Iraq in 2003, a foreign country came in and destroyed the country's
infrastructure, only to give foreign companies and institutions power in the
subsequent reconstruction efforts, they said.

For example, the Paris Club of bilateral creditors gave Iraq a partial and
conditional debt reduction in 2004 as long as it followed economic prescriptions
from the IMF. The Paris Club figures say the country's total debt for 2005 was
$63.2 billion, or 183 percent of GDP.

Now Iraq is back to borrowing from multilateral lenders like the IMF and the
World Bank. The IMF alone lent Iraq $685 million last year.

"The Lebanese people paid the first time by giving their lives, losing
their loved ones, enduring the destruction of their homes, their property, and
infrastructure," the authors said. "They must not pay a second time
by being bled dry to finance reconstruction."

Israel has also destroyed most of the Palestinian infrastructure, consistently
targeting power generation stations as well as government ministry buildings.

"Palestine, Iraq, and Lebanon must demand accountability from their aggressors,"
the CADTM analysts say.

For Lebanon, they suggested that its people demand cancellation of their debts
instead of allowing their government to seek more aid and new loans.

"For Lebanon, a possible solution resides in the immediate cancellation
of its debt and the establishment of funds for its reconstruction, which would
be fed by reparations deposited by Israel," the authors suggested.

The United States, which backed the Israeli campaign and helps equip and finance
the Israeli army, should also contribute to the fund.

"It is only then that it will be possible to say that the Lebanese people
will have received justice," they said.

In a telephone interview from Paris, Millet acknowledged that their proposal
will not fly without the commitment of the Lebanese government, which as part
of the local elite and ruling class, is unlikely to back a proposal that would
not benefit the local businessmen.

He argued that some rich Lebanese whose wealth is held in Western banks should
invest in their own country's bonds.

"They have no interest in [debt] cancellation because cancellation will
give power to those who suffer from the debt [the poor and the middle classes],"
Millet said.

The IMF itself acknowledges that without highly concessional new financing
for Lebanon, there is a real risk of the total collapse of the Lebanese economy.
The institution did not mention grants or debt cancellation.

The combination of a growing government financing need, higher world interest
rates, and lower GDP growth will all certainly cause Lebanon's debt to spiral
upward.